2003 group results milan, 26 march 2004 analyst …...group results 2003: the group first 12 month...
TRANSCRIPT
Analyst PresentationMilan, 26 march 20042003 Group Results
Index
Group economic results 2003
Group Balance sheet
Outlook
Conclusions
Appendix
Breakdown by business
2
Group economic results 2003
3
Group Results 2003: The Group first 12 month Financial Reports
Hera GroupEstablished with the first huge merger incurred in the Italian utility sector among 11 multi - utility companies at the end of 2002Leading position in the Waste, Water and Gas sector and a small trading electricity businessFloated in June 2003 on the basis of a 5 years business plan
2003 main activitiesReorganisation of 11 companies into a “Group” Further aggregation of smaller business into an unique business modelAcquisition of 42% of AGEA, a major local player close to the GroupNew main procurement contracts signed
Only 12 month to achieve the first synergiesThe IPO, the Group reorganisation and the business development deliver their first results in 2003.
4
Group Results 2003: Strong Growth thanks to the First Synergies
Turnover: +17,1%Organic Growth
Increase of customer base (+4,8% in Gas, +3,7% in Water),
Territorial further expansion (3 new municipalities & New Services)
Increase in tariffs (+3,7% water tariffs, Switch from tax-to-tariff in waste)
Dual Fuel policy+6,4x medium sized clients in the Electricity business
Favourable climate conditions
EBITDA: +26,4%Increased margins thanks to 23 mln € synergies exploited
Net Profit: +43,6% Tax benefits
2002 % 2003 % Incr.
Turnover 1.133,3 100,0% 1.331,3 100,0% 17,5%
Other operating cost (751,9) (66,3%) (896,4) (67,3%) 19,2%
Personnel costs (189,5) (16,7%) (192,4) (14,5%) 1,5%
EBITDA 191,9 16,9% 242,5 18,2% 26,4%
Provisions (33,0) (2,9%) (33,0) (2,5%) 0,1%Amm. & Depr., provisions (114,3) (10,1%) (129,7) (9,7%) 13,5%
EBIT 77,6 6,8% 112,8 8,5% 45,3%
Interest inc./(Exp.) (12,9) (1,1%) (15,7) (1,2%) 21,7%
Extraordinary inc./(Exp.) 12,0 1,1% (3,3) (0,2%) (127,5%)Adj. On financial assets (1,4) (0,1%) (5,2) (0,4%) 261,1%
Tax (38,7) (3,4%) (35,6) (2,7%) (7,9%)
Tax rate -51,4% -40,2%
Net Profit 36,6 3,2% 53,0 4,0% 44,8%
Minorities (3,4) (0,3%) (3,6) (0,3%) 4,7%
Group Profit 33,2 2,9% 49,4 3,7% 48,7%
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Personnel +5 mln€
2003 Goal of 200 HC Reduction…
…have been outperformed
Procurement costs +12mln€
Eni (75% procurement): good contractual conditions confirmed (-8% of AEEG average) VNG New contract (international shipping)Atel and Tirreno Power are procurement sources at good conditions
Group Results 2003: Outperforming synergies …
Other savings +6 mln€
Services, warehouses and materials
SAP is currently fully installed
Confirmed
Confirmed
Outperformed
Cumulated Cost Savings Planned
60
23
12
56
16
29
12
3
A2003 P2007Gas Labour G&A IT
6
2003
Total initial HC 4.538 Net Outflow (214)Delta Perimeter 104
Total HC 4.428
Group Results 2003: … and Organic Growth
Organic Growth +27 mln€
Outperformed
Natural extension of services supply on the territory served (3 new Municipalities, Geat and new services)
Natural increase in number of customers both in Gas and Water business
Water tariffs increase
Switch from tax to tariff scheme in Waste
Unexpected increase in Gas volume sold
Unexpected increase in Water volume sold with significant effect on Ebitda
and
Conservative assumptions on Gas Tariff decrease
Ebitda Margin: 18,2%
EBITDA Growth
Ebitda ‘02 Ebitda ‘03
192
243
+26,4%
23
23
15
12
Synergies
Volume Increase (Gas & Water)
Tariff Increase (Water & Waste)
7
Group Balance Sheet
8
Group Balance Sheet: Sound Capital Structure with a D/(D+E) 0,33x
Fixed AssetsCapex plan on track (210 mln€)
Significant investments in Agea, in Tirreno Power and other (110 mln €)
Working CapitalPhysiological growth following turnover expansion
NFPIncreased maintaining a conservative leverage
IPO Plan leverage goal realised (not including investments)
Memorandum Accounts
Mainly related to third party assets
2002 2003
Fixed Asset 1.202,6 1.427,0
Working Capital 73,9 89,2(Provisions) (157,3) (177,4)
INVESTED CAPITAL 1.119,1 1.338,8 Share Capital 788,5 793,2
Net Equity 865,3 894,5Financial Debts 185,3 352,4Net short term financial position 68,5 91,9
Net Financial Position 253,8 444,3
FINANCIAL STRUCTURE 1.119,1 1.338,8
9
Group Balance Sheet: Cashflows Effort Strong Pay Out Ratios
Cashflows in line with the IPO Plan (that could not include investments)
* Balance Sheet NFP
NFP 12/’02 Net Profit D&AChange Net W.C.
and Provisions CapexNet Equitychanges NFP 12/’03
-68ST
53
LT
125
-110
-92ST
-166
LT
234
-195
287
254*
444*
-26
Investm.
-210
6
-27
Dividend
-110
-47
-20
10
Group Balance Sheet: Capex budgeted on track
WTE Plants and Land fieldsFEA plant construction is almost completed
Gas, Water and E.E. networkEfficient and wider networks
Strategic Projects All authorisations for the other WTE plants are expected within summerInclude Project costs of the plants
Group Reorganisation SAP and other reorganisations
Other BusinessDistrict Heating, Public Light., Funerary service and telematic regional plan
75 mln €
79 mln €
2 mln €
28 mln €
TOTAL CAPEX 2003 210 mln €
26 mln €
Construction Operational
Forlì (WTE)
Rimini (WTE)
Faenza (WTE)Fea (WTE)
Ravenna* (WTE)
Incr. (MW)
8.210.3
10.3
22
2003 2004 2005 2006 2007
10.3
Timing
*Included after IPO 5 year business Plan*Included after IPO 5 year business Plan
Rimini (CCGT)Imola (CCGT) 80
230
Incr. (MW)Timing
Construction Operational2003 2004 2005 2006 2007
Fea (WTE)
Incr. (MW)
8.210.3
10.3
22
10.3
Timing
Construction Operational
2003 2004 2005 2006 2007
11
Group Balance Sheet: Significant Strategic Investments
42% AGEA 58 mln €Same portfolio businessProfitable and synergic with Hera
10% of Hera size 5,5% TIRRENO POWER 18 mln €
Third and cheapest Genco sold by Enel
Other Small investments 11 mln €Organic growth and 23 mln €other changes
Consolidation of Gala and Geat and IAS effect
Strategic Investments:Multi- utility Companies fit table to Hera and close to the Group operational territoryWilling to merger 100% based on Hera modelSignificant synergy potentials
12
Group Balance Sheet: Successful Sector Consolidation Activities
Agea InvestmentAcquisition of 42% stake and further 51% stake to be acquired with exchange of shares within 200458 mln€ consideration (include control premium and 10 mln€ of capital increase). Total consideration expected at an implied EV/Ebitda: 7x (37 mln€ E2003 NFP)
>30 mln€ estimated value of synergiesCore Operations in Ferrara (close to Hera Group) similar to Hera business portfolio
Other ConsolidationsGeat: Multi-utility in Riccione3 minor activities in Municipalities close to Hera
On a proforma basis the Ebitda Growth reaches +38,8%
93
Ebitda '0
2Syn
& O Growth
Ebitda '0
3
Agea
FEA
13
192
243
Proforma 2003 EBITDA with Agea
+26,4%
Proforma with Agea +38,8%
E295
51
Ebitda ‘02 Ebitda ‘03 Ebitda ’03Proforma
Synergy &Org. Growth
AGEA
23,5 266,5
Group Balance Sheet : Higher than Expected Dividends
4,9 € cents DPS 85% pay out ratioExpected 46 million € Net Profit
5,3 € cents DPS 85% pay out ratio of consolidated results49,4 million € Net Profit
IPO Commitments
Dividend 2003+8,2%
Dividends higher than expected (€cents)
Dividend Yield of 4,2%*
5,3
*Yield calculated on the IPO price of 1,25€
4,9
E2003 A2003
5,35,2
14
Outlook
15
Around +20% expected growth
Outlook: Expected Ebitda Growth is Visible
Further synergiesFurther Personnel, Procurement Costs and Other Savings were estimated in the IPO business planA deeper knowledge, gathered in this year, helped to find room for new synergies
FEA (WTE)Enters in operation in 2004Incentive tariff scheme (CIP 6)
Organic GrowthCustomers and tariffs increase
AgeaFull integration in 2004Agea Expected Ebitda Growth
Estimated 2004 EBITDA Growth
Expected Capex 2004 of 220 mln €Expected NFP 2004 of 473 mln €
16
+26,4%
Ebitda ‘02 Ebitda ‘03 Ebitda ’04EstimatesSynergy &
Org. GrowthSynergy &
Org. Growth
FEA
AGEA
243
192
51
Outlook: On Top…Sector Consolidation Opportunities
The sector is moving towards major changes: “consolidation” is the response to face increasing competition pressure
First movers are considered natural points of reference of the consolidation game
Hera has interesting expansion opportunities:
West: Emilia Romagna region (Group focus)
South: fragmented and interesting market in the region of Marche
North: Natural further expansion beyond AGEA (Ferrara) in southern Lombardia and Veneto
A unique open ended business model to catch increasing Sector Consolidation opportunities
HERA
17
Outlook: Vertical integration opportunities
Strategic expansion guidelines include the business vertical integration in the Waste business
The Group is enclosed in the “short list” for the ENI Ambiente waste treatment business in Ravenna that is going to be dismissed by ENI Group.
An opportunity to strengthen the waste treatment business
Strategic Joint ventures opportunities for the construction of electric generation plants are under evaluation in order to sustain the electricity business development.
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Consolidations and vertical integration in Waste and Electricity business are strategic Plans to be considered “On top” the IPO business plan
Outlook: 2002 - 2007 Ebitda CAGR
5 year planned Ebitda Growth in IPO PlanE2004 Higher Ebitda Growth than planned
Outperforming 2003 resultsNext Agea full consolidationProfitable WTE plant (FEA) on trackBetter knowledge of further synergies and organic growth potentials within the Group
Confirmed IPO Plan strategic rational A new business plan is requested considering 2003 outperforming synergies and sector consolidation results
19
243300
378
E 2007
192
243
Planned 5 year CAGR 14,4%
A2002
A2003
E 2004
E 2005
E 2006
Conclusions
2003 results outperformed expectations
The huge growth realised has been driven only by synergies deriving from the Hera-merger
Further Ebitda Growth is expected in 2004 thanks to:Further synergiesNew projects (FEA)Agea consolidationOrganic Growth
Expansion opportunities through further sector consolidations are constantly monitored
Dividends per share at 0,053€ higher than expected (yield of 4,2%): confirmed the 85% pay out commitment on consolidated results for year 2004-2007
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Break Down by Business
21
Appendix
Break Down by Business: WASTE
Turnover: -1,9%Increased sales thanks to switch from tax to tariff of further Municipalities servedReductions of volumes in low value added waste (Chemical treatment).
Ebitda: +7,0%Synergy deriving from a rational use of the plants Increase in margin thanks to focus on higher value added activities
Hera is focusing on WASTE Business with a huge investment plan in order to expand WTE capacity maintaining the leadership in this profitable field
… waiting for FEA (WTE plant in Bologna)
2002 % 2003 % Incr.%Sales 288,4 99,0% 284,6 99,6% (1,3%)Capitalisation of cost 2,9 1,0% 1,2 0,4% (58,6%)
Turnover 291,3 100,0% 285,8 100,0% (1,9%)
Other operating cost (154,0) (52,9%) (148,4) (51,9%) (3,6%)Personnel costs (79,1) (27,2%) (75,1) (26,3%) (5,1%)
EBITDA 58,2 20,0% 62,3 21,8% 7,0%
2002 2003 Incr.%
Volume treated 2.490 2.393 (3,9%)Landfields 956 919 (3,9%)WTE 371 362 (2,4%)Sorting 366 433 18,3%Composit. 130 141 8,5%Chemical treatment 667 538 (19,3%)
Tax to tariff. (N. Municipalities switched to tariff)
22
23 33 (43,5%)
Break Down by Business: WATER
Sales: +8,6%Hot climate boosts pro - capite consumption
Customers increase of 3,7%
Tariff increase of 3,6%
Higher capitalised costs following new accounting for capex
Ebitda: +23,9%Higher turnover with marginal cost increase
No impact of capitalised cost on Ebitda
Increase in customer base and volumes, tariffs and margins
Increased profitability mainly thanks to un-elastic cost structure and synergy exploitation
2002 % 2003 % Incr.%Sales 195,4 76,4% 212,3 70,3% 8,6%Other 45,3 17,7% 35,7 11,8% (21,2%)Capitalisation of cost 15,0 5,9% 53,8 17,8% 258,7%
Turnover 255,7 100,0% 301,8 100,0% 18,0%Other operating cost (137,1) (53,6%) (175,7) (58,2%) 28,2%Personnel costs (65,0) (25,4%) (59,7) (19,8%) (8,2%)
EBITDA 53,6 21,0% 66,4 22,0% 23,9%
2002 2003 Incr.%Clients 616.860 639.563 3,7%
Domestic clients 512.746 535.697 4,5%Industrial clients 104.114 103.866 -0,2%
Volumes (mln c/mt) 176,3 180,2 2,2%
Domestic clients 116,3 118,9 2,2%Industrial clients 60,0 61,3 2,2%
Fresch Water Tariff incr. 3,6%
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Break Down by Business: Energy Business
Energetic activities represent 49% of Group turnoverThe Strong position held in Gas sector is defended with a dual fuel policyElectricity business is currently based on trading activities310 MW of Production facilities are planned to be built
Outperform customer base increase thanks to Dual Fuel Policy
Gas business outperformed expectations
Sales: +25,4%Cold climate boosts pro-capite consumptionGas Customers increase of 4,8%Electric medium sized customers increase by 6,4x
Ebitda margin: +230 basis pointsLow procurement costsOther synergies
2002 % 2003 % Incr.%Sales and other rev. 511,0 90,3% 640,7 97,3% 25,4%Heat Mgt and Pub. Light. 40,5 7,2% 0,0 0,0% 0,0%Capitalisation of cost 14,1 2,5% 17,9 2,7% 27,0%
Turnover 565,6 100,0% 658,6 100,0% 16,4%
Other operating cost (449,8) (79,5%) (516,2) (78,4%) 14,8%Personnel costs (36,0) (6,4%) (34,5) (5,2%) (4,2%)
EBITDA 79,8 14,1% 107,9 16,4% 35,2%
24
Break Down by Business: GAS
Sales: +18,8%More favourable Climatic conditions vs a “Hot 2002”Customer base increase following natural expansion
Ebitda: +41,4% Increased turnoverProcurement cost savingsOther savings
Dual Fuel policy applied, on gas customers helps to fidelise medium sized customers2003 figures do not include activities reclassified in “Other Business”
Benefit from synergies and Growth
2002 % 2003 % Incr.%Sales and other rev. 432,6 89,1% 514,1 97,1% 18,8%Heat Mgt and Pub. Light. 40,5 8,3% 0,0 0,0% 0,0%Capitalisation 12,2 2,5% 15,5 2,9% 27,0%
Turnover 485,3 100,0% 529,6 100,0% 9,1%
Other operating cost (382,6) (78,8%) (400,0) (75,5%) 4,5%Personnel costs (32,2) (6,6%) (29,9) (5,6%) (7,1%)
EBITDA 70,5 14,5% 99,7 18,8% 41,4%
2002 2003 Incr.%Clients 667.930 699.861 4,8%Domestic 667.695 699.504 Industrial and medium sized c. 235 357
Volumes 1.444 1.634 13,1%Domestic 1.149 1.309 Industrial and medium sized c. 296 325
Avg. sales price per c/ mt (€) 0,299 0,302 1,0%
25
Break Down by Business: ELECTRICITY
Turnover: +61,5%Commercial success (6,4x customers)
Expectations outperformed in slightly more than half a year
Ebitda: -11,8%Decreasing trade margins as expected
Planned CCGT plants to gather the margins on production
Dual fuel approach gathering a first strong growth in customer
Electricity prices used as a commercial tool to preserve Gas customersElectricity business finalised to serve local customers
2002 % 2003 % Incr.%
Sales and other rev. 78,4 97,6% 126,6 98,1% 61,5%Capitalisation of cost 1,9 2,4% 2,4 1,9% 26,3%
Turnover 80,3 100,0% 129,0 100,0% 61,5%
Other operating cost (67,2) (83,7%) (116,2) (90,1%) 72,9%Personnel costs (3,8) (4,7%) (4,6) (3,6%) 21,1%
EBITDA 9,3 11,6% 8,2 6,4% (11,8%)
2002 2003 Incr.%Clients 48.934 50.075 2,3%Domestic 48.796 49.049 0,5%Industrial and medium sized c. 138 1.026 643,5%
Volumes (GW/h) 948 1.629 31,4%Domestic 242 228 (5,9%)Industrial and medium sized c. 706 1.018 44,2%
Avg. Tariffs
5,86
6,13
4,6%7,53
6,22
(17,4%)
Trader 383
26
-
DomesticIndustrial and medium sized c.
Break Down by Business: OTHER
TurnoverThe two reclassified businesses account for around 50% of turnover
New service added in 2003 (Funerary in Bologna)
EbitdaBetter margins are expected thanks to synergy and growth potentials
Huge increase thanks to Heat Mng./District Heating and Public Lighting reclassification and addition of new services
Public Lighting business with 200.000 light pointsFurther rationalisations in progress to exploit synergy and growth potentials
Heat Mng.32%
P Light.25%
Funerary22%
Other21%
Sales 2003 Ebitda 2003Heat Mng.
7%
P Light.36%
Funerary42%
Other15%
2002 % 2003 % Incr. %24,2 88,3% 83,7 82,5% 245,9%
Capitalisation of costsSales
3,2 11,7% 17,7 17,5% 453,1%
Turnover 27,4 100,0% 101,4 100,0% 270,1%
Other operating cost (17,6) (64,2%) (72,2) (71,2%) 310,2%Personnel costs (9,4) (34,3%) (23,2) (22,9%) 146,8%
EBITDA 0,4 1,5% 6,0 5,9% 1400,0%
27